DEPARTMENT OF HEALTH AND HUMAN SERVICES 

45 CFR Parts 155 and 156 

[CMS-9964-P2] 

RIN 0938-AR76 

Patient Protection and Affordable Care Act; Establishment of Exchanges and 

Qualified Health Plans; Small Business Health Options Program 

AGENCY: Centers for Medicare & Medicaid Services (CMS), HHS. 

ACTION: Proposed rule. 

SUMMARY: This proposed rule would implement provisions of the Patient Protection 

and Affordable Care Act and the Health Care and Education Reconciliation Act of 2010 

(collectively referred to as the Affordable Care Act) related to the Small Business Health 

Options Program (SHOP). Specifically, this proposed rule would amend existing 

regulations regarding triggering events and special enrollment periods for qualified 

employees and their dependents and would implement a transitional policy regarding 

employees’ choice of qualified health plans (QHPs) in the SHOP. 

DATES: To be assured consideration, comments must be received at one of the 

addresses provided below, no later than 5 p.m. on [OFR--insert date 30 days after the

date of filing for public inspection at OFR]. 

ADDRESSES: In commenting, please refer to file code CMS-9964-P2. Because of staff 

and resource limitations, we cannot accept comments by facsimile (FAX) transmission. 

 You may submit comments in one of four ways (please choose only one of the 

ways listed): 
 2 

1. Electronically. You may submit electronic comments on this regulation to 

http://www.regulations.gov. Follow the "Submit a comment" instructions. 

 2. By regular mail. You may mail written comments to the following address 

ONLY: 

 Centers for Medicare & Medicaid Services, 

Department of Health and Human Services, 

Attention: CMS-9964-P2, 

P.O. Box 8016, 

Baltimore, MD 21244-8016. 

Please allow sufficient time for mailed comments to be received before the close 

of the comment period. 

3. By express or overnight mail. You may send written comments to the 

following address ONLY: 

 Centers for Medicare & Medicaid Services, 

 Department of Health and Human Services, 

 Attention: CMS-9964-P2, 

 Mail Stop C4-26-05, 

 7500 Security Boulevard, 

Baltimore, MD 21244-1850.

4. By hand or courier. Alternatively, you may deliver (by hand or courier) 

your written comments ONLY to the following addresses prior to the close of the 

comment period: 

a. For delivery in Washington, DC-- 
 3 

 Centers for Medicare & Medicaid Services, 

Department of Health and Human Services, 

Room 445-G, Hubert H. Humphrey Building, 

 200 Independence Avenue, SW., 

 Washington, DC 20201 

(Because access to the interior of the Hubert H. Humphrey Building is not readily 

available to persons without Federal government identification, commenters are 

encouraged to leave their comments in the CMS drop slots located in the main lobby of 

the building. A stamp-in clock is available for persons wishing to retain a proof of filing 

by stamping in and retaining an extra copy of the comments being filed.) 

b. For delivery in Baltimore, MD-- 

 Centers for Medicare & Medicaid Services, 

Department of Health and Human Services, 

7500 Security Boulevard, 

Baltimore, MD 21244-1850. 

If you intend to deliver your comments to the Baltimore address, call telephone 

number (410) 786-7195 in advance to schedule your arrival with one of our staff 

members. 

 Comments erroneously mailed to the addresses indicated as appropriate for hand 

or courier delivery may be delayed and received after the comment period. 

For information on viewing public comments, see the beginning of the 

"SUPPLEMENTARY INFORMATION" section. 

FOR FURTHER INFORMATION CONTACT: 
 4 

Leigha Basini at (301) 492-4307. 

SUPPLEMENTARY INFORMATION: 

Inspection of Public Comments: All comments received before the close of the comment 

period are available for viewing by the public, including any personally identifiable or 

confidential business information that is included in a comment. We post all comments 

received before the close of the comment period on the following website as soon as 

possible after they have been received: http://www.regulations.gov. Follow the search 

instructions on that website to view public comments. 

 Comments received timely will also be available for public inspection as they are 

received, generally beginning approximately 3 weeks after publication of a document, at 

the headquarters of the Centers for Medicare & Medicaid Services, 7500 Security 

Boulevard, Baltimore, Maryland 21244, Monday through Friday of each week from 8:30 

a.m. to 4 p.m. To schedule an appointment to view public comments, phone 1-800-743-

3951. 

I. Executive Summary 

 Beginning in 2014, individuals and small businesses will be able to purchase 

private health insurance through competitive marketplaces, called Affordable Insurance 

Exchanges or “Exchanges.” Section 1311(b)(1)(B) of the Affordable Care Act directs 

each state that chooses to operate an Exchange to also establish a SHOP that assists 

eligible small businesses in providing health insurance options for their employees. The 

final rule Patient Protection and Affordable Care Act; Establishment of Exchanges and 

Qualified Health Plans; Exchange Standards for Employers (Exchange Establishment 
 5 

Rule)1 as modified by the Notice of Benefit and Payment Parameters for 2014, published 

elsewhere in this issue of the Federal Register, set forth standards for the administration 

of SHOP Exchanges. In this proposed rule, we would amend some of the standards 

established in that final rule. 

In the Exchange Establishment Rule, we established standards for special 

enrollment periods for people enrolled through an Exchange or SHOP and provided that, 

in most instances, a special enrollment period is 60 days from the date of the triggering 

event. See 45 CFR 155.420. We also made these provisions applicable to SHOPs, at 

§155.725(a)(3). We now propose to amend the special enrollment period for the SHOP 

to 30 days for most applicable triggering events, so that it aligns with the special 

enrollment periods for the group market established by the Health Insurance Portability 

and Accountability Act of 1996 (HIPAA). To further align the SHOP provisions with 

HIPAA, we also propose that if an employee or dependent becomes eligible for premium 

assistance under Medicaid or the Children’s Health Insurance Program (CHIP) or loses 

eligibility for Medicaid or CHIP, this would be a triggering event, and the employee or 

dependent would have a 60-day special enrollment period to select a QHP. This 

triggering event had previously been inadvertently omitted from the regulations because 

it applies only to group health plans and health insurance coverage in the group market. 

We are also proposing to make a conforming change to §156.285(b)(2), so that this 

section references the SHOP special enrollment periods in a way that is consistent with 

our proposed changes to §155.725. 

 

1

 Patient Protection and Affordable Care Act; Establishment of Exchanges and Qualified Health Plans; 

Exchange Standards for Employers, 77 Fed. Reg. 18310 (Mar. 27, 2012) (to be codified at 45 CFR parts 

155, 156, & 157).
 6 

 In the Exchange Establishment Rule, we also set forth the minimum functions of a 

SHOP, including that the SHOP must allow employers the option to offer employees all 

QHPs at a level of coverage chosen by the employer, and that the SHOP may allow 

employers to offer one or more QHPs to qualified employees by other methods. We now 

propose the following transitional policy. For plan years beginning on or after January 1, 

2014 and before January 1, 2015, a SHOP would not be required to permit qualified 

employers to offer their qualified employees a choice of QHPs at a single level of 

coverage but would have the option of doing so. For plan years beginning on or after 

January 1, 2014 and before January 1, 2015, Federally-facilitated SHOPs (FF-SHOPs) 

would not exercise this option, but would instead assist employers in choosing a single 

QHP to offer their qualified employees. This transitional policy is intended to provide 

additional time to prepare for an employee choice model and to increase the stability of 

the small group market while providing small groups with the benefits of SHOP in 2014 

(such as a choice among competing QHPs and access for qualifying small employers to 

the small business health insurance tax credit). We are also proposing changes to the 

effective date of the SHOP premium aggregation function set forth at §155.705(b)(4) in 

the Exchange Establishment Rule consistent with this transitional policy. 

II. Background 

A. Legislative Overview

Section 1311(b) of the Affordable Care Act establishes that each state that 

operates an Exchange will also operate a SHOP. The SHOP is designed to assist 

qualified small employers in providing health insurance options to their employees. 
 7 

Section 1311(c)(6) of the Affordable Care Act sets forth that the Secretary of 

Health and Human Services (HHS) shall require Exchanges to provide for special 

enrollment periods. Section 155.420 of the Exchange Establishment Rule established 

special enrollment periods for the individual market, and §155.725(a)(3) established them 

for the SHOP. 

Section 1312(a)(2) of the Affordable Care Act provides that qualified employers 

may offer qualified employees a choice among all QHPs at a level of coverage chosen by 

the employer. Section 1312(f)(2)(A) defines a qualified employer as a small employer 

that elects to make all full-time employees of such employer eligible for one or more 

QHPs offered in the small group market through an Exchange that offers QHPs. The 

Exchange Establishment Rule set forth standards for the SHOP and implemented section 

1312 at 45 CFR, part 155, subpart H. 

B. Stakeholder Consultation and Input

 HHS has consulted with a wide range of interested stakeholders on policy matters 

related to the SHOP, including through regular conversations with the National 

Association of Insurance Commissioners (NAIC), health insurance issuers, trade groups, 

consumer advocates, employers, agents and brokers, and other interested parties. HHS 

has also held many consultations with states about the SHOP, both individually and 

through group conversations. HHS received many comments in response to the 

Exchange Establishment proposed rule,2

 including comments regarding the statutory 

provisions on SHOP employee choice and special enrollment periods for employees and 

 

2

Patient Protection and Affordable Care Act; Establishment of Exchanges and Qualified Health Plans; 

Proposed Rule, 76 Fed. Reg. 41866 (July 15, 2011) (to be codified at 45 CFR parts 155 and 156).
 8 

their dependents, to which we responded in the Exchange Establishment Rule. HHS also 

received comments in response to the December 2012 Notice of Benefit and Payment 

Parameters for 2014 proposed rule,3

 to which we responded in the Notice of Benefit and 

Payment Parameters for 2014 final rule, published elsewhere in this issue of the Federal 

Register. We considered these stakeholder comments in developing this proposed rule. 

C. Structure of the Proposed Rule

 The regulations outlined in this proposed rule would be codified in 45 CFR parts 

155 and 156. The provisions in part 155 outline the standards relative to the 

establishment, operation, and functions of Exchanges, including the SHOP. The 

provisions in part 156 outline the health insurance issuer standards under the Affordable 

Care Act, including standards related to Exchanges and SHOPs. 

III. Provisions of the Proposed Regulations 

A. Part 155—Exchange Establishment Standards and Other Related Standards Under the 

Affordable Care Act 

1. Subpart H—Exchange Functions: Small Business Health Options Program (SHOP) 

a. Functions of a SHOP (§155.705) 

 Facilitating employee choice at a single level of coverage selected by the 

employer – bronze, silver, gold, or platinum – is a required SHOP function established in 

the Exchange Establishment Rule (45 CFR 155.705(b)(2)) and discussed in greater detail 

in the preamble to the December 2012 HHS Notice of Benefit and Payment Parameters 

for 2014 proposed rule. In addition, the rules permit SHOPs to allow a qualified 

 

3 Patient Protection and Affordable Care Act; HHS Notice of Benefit and Payment Parameters for 2014; 

Proposed Rule, 77 Fed. Reg. 73118 (Dec. 7, 2012) (to be codified at 45 CFR parts 153, 155, 156, 157, and 

158).
 9 

employer to choose one QHP for employees (§155.705(b)(3)). Because providing 

employees with a choice of QHPs at the same level of coverage would create no 

additional costs for an employer who would otherwise offer only one QHP to its 

employees, we proposed in the December 2012 HHS Notice of Benefit and Payment 

Parameters for 2014 proposed rule that qualified employers in FF-SHOPs would choose a 

level of coverage (bronze, silver, gold, or platinum) and a contribution, and employees 

would then choose any QHP at that level. 

When we proposed this policy, we also sought comments on a transitional policy 

in which a FF-SHOP would allow or direct employers to offer to their employees a single 

QHP from those offered through the SHOP (77 FR 73184). A few commenters opposed 

offering the single QHP option, suggesting that each FF-SHOP should focus on providing 

employee choice. Most commenters on this issue, however, supported offering a single 

QHP option for employers, either as an additional option or as the only option in the 

initial years of the FF-SHOP. The commenters who supported providing a qualified 

employer only the option of offering a single QHP in the initial years of FF-SHOP 

operation cited several concerns, including the following: whether issuers could meet the 

deadlines for submission of small group market QHPs given the new small group market 

rating rules; whether issuers could complete enrollment and accounting system changes 

required to interact with the SHOP enrollment and premium aggregation systems 

required by employee choice; and whether there would be adequate time to educate 

employers, employees, and brokers about the employer and employee choices available 

in the SHOP. The commenters stated that issuer efforts to prepare and price QHPs for an 

employee choice environment and to make the systems and operational changes required 
 10 

for SHOP enrollment and premium aggregation could compete with efforts to prepare for 

participation in the Exchange (both individual and SHOP). 

 Most of these comments supported allowing employers the option to offer only a 

single QHP in the FF-SHOP. Consequently, we concluded in the final HHS Notice of 

Benefit and Payment Parameters for 2014, published concurrently with this proposed 

rule, that the FF-SHOP would provide employers the choice of offering only a single 

QHP, as employers customarily do today, in addition to the choice of offering all QHPs 

at a single level of coverage. 

We note that the comments in response to the draft Notice of Benefit and Payment 

Parameters for 2014 identified challenges to effective implementation of employee 

choice in the FF-SHOP in 2014; we also note that most of the comments also apply to 

implementation challenges in State-based SHOPs. In order to respond to these comments 

and to provide both State-based SHOPs and FF-SHOPs with greater flexibility, we 

therefore now propose to delay until 2015 implementation of the employee choice model 

as a requirement for all SHOPs. We also now propose that FF-SHOPs should assist 

qualified employers in offering qualified employees a single QHP choice for plan years 

beginning during calendar year 2014, which qualifies certain of these employers for the 

small business tax credit. 

The Exchange Establishment Rule also included a premium aggregation function 

for the SHOP that was designed to assist employers whose employees were enrolled in 

multiple QHPs. Because this function will not be necessary in 2014 for SHOPs that 

delay implementation of the employee choice model, we have also proposed at 

§155.705(b)(4) that the premium aggregation function be optional for plan years 
 11 

beginning before January 1, 2015. 

Specifically, we are now proposing amendments to §155.705(b)(2), (b)(3), and 

(b)(4) providing as follows: (1) the effective date of the employer choice requirements at 

§155.705(b)(2) and the premium aggregation requirements at §155.705(b)(4) for both 

State-based SHOPs and FF-SHOPs will be January 1, 2015; ( 2) State-based SHOPs 

could elect to offer employee choice and perform premium aggregation for plan years 

beginning before January 1, 2015, but need not do so; and (3) FF-SHOPs will begin to 

offer employee choice and premium aggregation in plan years beginning on or after 

January 1, 2015. We welcome further comment on this proposal. 

b. Enrollment Periods Under SHOP (§155.725) 

 The Exchange Establishment Rule established special enrollment periods for 

Exchanges serving the individual market (§155.420), and the SHOP regulations adopted 

most of these provisions by reference (§155.725(a)(3)). Under these regulations, unless 

specifically stated otherwise in the regulations, a qualified individual has 60 days from 

the date of the triggering event to select a QHP (§155.420(c)). 

 This SHOP provision differs from the length of special enrollment periods in 

group markets provided by HIPAA, which last for 30 days after loss of eligibility for 

other private insurance coverage or after a person becomes a dependent through 

marriage, birth, adoption, or placement for adoption.4 Because we believe that there is no 

rationale for providing a longer special enrollment period in a SHOP than is provided in 

the group market outside the SHOP, we propose amendments to §155.725 to clarify that 

 

4 See 26 CFR 54.9801-6, 29 CFR 2590.701-6, and 45 CFR 146.117 for regulations regarding special 

enrollment periods under HIPAA. 
 12 

a qualified employee or dependent of a qualified employee who has obtained coverage 

through the SHOP would have 30 days from the date of most of the triggering events 

specified in §155.420 to select a QHP. Additionally, consistent with revisions to HIPAA 

enacted by the Children’s Health Insurance Program Reauthorization Act of 2009 

(CHIPRA), Pub. L. 111-3, § 311 (Feb. 4, 2009), we propose that a qualified employee or 

dependent of a qualified employee who has become ineligible for Medicaid or CHIP or 

who has become eligible for state premium assistance under a Medicaid or CHIP 

program would be eligible for a special enrollment period in a SHOP and would have 60 

days from the date of the triggering event to select a QHP. Specifically, we propose 

striking §155.725(a)(3) and adding a new paragraph (j) consolidating the proposed 

SHOP special enrollment provisions in one paragraph. We propose a provision clarifying 

that a dependent of a qualified employee is only eligible for a special enrollment period if 

the employer offers coverage to dependents of qualified employees. We also propose 

paragraphs (j)(5) and (j)(6) that retain certain provisions relating to effective dates of 

coverage and loss of minimum essential coverage from the original §155.420. We 

propose conforming revisions to §156.285(b)(2), so that provision would reference the 

special enrollment periods in proposed §155.725(j) instead of those set forth at §155.420. 

 We believe these changes appropriately align the SHOP provisions with provisions 

applicable to the rest of the group market, and welcome comment on the proposal. 

IV. Collection of Information Requirements 

This proposed rule, if finalized, would not impose new or alter existing 

information collection and recordkeeping requirements. Consequently, it need not be 
 13 

reviewed by the Office of Management and Budget under the authority of the Paperwork 

Reduction Act of 1995. 

V. Response to Comments 

Because of the large number of public comments we normally receive on Federal 

Register documents, we are not able to acknowledge or respond to them individually. 

We will consider all comments we receive by the date and time specified in the 

"DATES" section of this preamble, and, when we proceed with a subsequent document, 

we will respond to the comments in the preamble to that document.

VI. Regulatory Impact Analysis 

We have examined the impact of this final rule as required by Executive Order 

12866 on Regulatory Planning and Review (September 30, 1993) and Executive Order 

13563 on Improving Regulation and Regulatory Review (January 18, 2011). Executive 

Orders 12866 and 13563 direct agencies to assess all costs and benefits of available 

regulatory alternatives and, if regulation is necessary, to select regulatory approaches that 

maximize net benefits (including potential economic, environmental, public health and 

safety effects, distributive impacts, and equity). A regulatory impact analysis (RIA) must 

be prepared for major rules with economically significant effects ($100 million or more 

in any one year). It is HHS’s belief that this proposed rule does not reach this economic 

threshold and thus is not considered a major rule. 

This proposed rule consists of a provision to amend the duration of certain special 

enrollment periods to correspond to the duration in group markets under HIPAA. The 

rule also proposes to add a triggering event that would create a special enrollment period 

for qualified employees and/or their eligible dependents when an employee or qualified 
 14 

dependent with coverage through the SHOP becomes eligible for state premium 

assistance under Medicaid or CHIP or loses eligibility for Medicaid or CHIP. HIPAA, as 

revised by CHIPRA, already includes this triggering event, which was inadvertently 

omitted from the original list in §155.420(d) because it applies only to group health plans 

and health insurance coverage in the group market. We do not believe either of these 

actions would impose any new costs on issuers, employers, enrollees, or the SHOP. In 

fact, the proposed amendment would create alignment of SHOP regulations with laws for 

the existing group market and could potentially create efficiencies for QHP issuers. 

Finally, this proposed rule would require SHOPs to provide qualified employers 

the option to offer qualified employees a choice of any QHP at a single metal level 

starting with plan years beginning on or after January 1, 2015, instead of January 1, 2014. 

 For plan years beginning in calendar year 2014, qualified employers would offer 

qualified employees coverage under a single QHP in FF-SHOPs; State-based SHOPs 

would have the flexibility to offer either employer or employee choice in 2014. In our 

analysis of the impact of employer and employee choices in the Notice of Benefit and 

Payment Parameters for 2014 final rule, published elsewhere in this issue of the Federal 

Register, we noted that adding the option for employers to offer a single QHP would 

have the potential effect of reducing adverse selection and any associated risk premium 

and a slight effect of decreasing the consumer benefit resulting from choice. We believe 

the same analysis applies to our proposal to provide employer choice in 2014. 

Issuers will incur costs adapting their enrollment and financial systems to interact 

with a SHOPs enrollment and premium aggregation systems. The costs and benefits of 

Exchange and SHOP implementation were assessed in the RIA for the Exchange 
 15 

Establishment final rule, titled Patient Protection and Affordable Care Act; Establishment 

of Exchanges and Qualified Health Plans, Exchange Standards for Employers and 

Standards Related to Reinsurance, Risk Corridors and Risk Adjustment Regulatory 

Impact Analysis (Exchange RIA).5

 Because issuers may now have an additional year to 

develop these systems and may thus be able to stage their efforts rather than 

implementing all system changes by October 1, 2013, we believe that the total cost will 

be unchanged in total. 

From the Exchange perspective, in the Exchange RIA, we noted that a Statebased Exchange could incur costs in establishing a premium aggregation function for the 

SHOP. Therefore, the policy in this proposed rule could decrease costs to states that 

operate a State-based Exchange for the 2014 plan year. 

VII. Regulatory Flexibility Act 

The Regulatory Flexibility Act (5 U.S.C. 601 et seq.) (RFA) requires agencies to 

prepare an initial regulatory flexibility analysis to describe the impact of the proposed 

rule on small entities, unless the head of the agency can certify that the rule would not 

have a significant economic impact on a substantial number of small entities. The RFA 

generally defines a “small entity” as--(1) a proprietary firm meeting the size standards of 

the Small Business Administration (SBA); (2) a not-for-profit organization that is not 

dominant in its field; or (3) a small government jurisdiction with a population of less than 

50,000. States and individuals are not included in the definition of “small entity.” HHS 

uses as its measure of significant economic impact on a substantial number of small 

 

5 Patient Protection and Affordable Care Act; Establishment of Exchanges and Qualified Health Plans, 

Exchange Standards for Employers and Standards Related to Reinsurance, Risk Corridors and Risk 

Adjustment Regulatory Impact Analysis, March 2012. Available at: 
 16 

entities a change in revenues of more than 3 percent. 

The RFA requires agencies to analyze options for regulatory relief of small 

businesses, if a proposed rule has a significant impact on a substantial number of small 

entities. For purposes of the RFA, small entities include small businesses, nonprofit 

organizations, and small government jurisdictions. Small businesses are those with sizes 

below thresholds established by the SBA. 

For the purposes of the regulatory flexibility analysis, we expect the following 

types of entities to be affected by this proposed rule--(1) small employers and (2) QHP 

issuers. 

As discussed in Health Insurance Issuers Implementing Medical Loss Ratio 

(MLR) Requirements Under the Patient Protection and Affordable Care Act; Interim 

Final Rule,6

 few, if any, issuers are small enough to fall below the size thresholds for 

small business established by the SBA. In that rule, we used a data set created from 2009 

National Association of Insurance Commissioners (NAIC) Health and Life Blank annual 

financial statement data to develop an updated estimate of the number of small entities 

that offer comprehensive major medical coverage in the individual and group markets. 

For purposes of that analysis, HHS used total Accident and Health earned premiums as a 

proxy for annual receipts. We estimated that there are 28 small entities with less than $7 

million in accident and health earned premiums offering individual or group 

comprehensive major medical coverage.7

 However, this estimate may overstate the 

 

http://cciio.cms.gov/resources/files/Files2/03162012/hie3r-ria-032012.pdf. 6 Health Insurance Issuers Implementing Medical Loss Ratio (MLR) Requirements Under the Patient 

Protection and Affordable Care Act; Interim Final Rule, 75 Fed. Reg. 74864, 74918-20 (Dec. 1, 2010) (to 

be codified at 45 CFR part 158).

7 According to SBA size standards, entities with average annual receipts of $7 million or less would be 
 17 

actual number of small health insurance issuers offering such coverage, since it does not 

include receipts from these companies’ other lines of business. We further estimate that 

any issuers that would be considered small businesses are likely to be subsidiaries of 

larger issuers that are not small businesses. 

The SHOP is limited by statute to employers with at least one but not more than 

100 employees. For this reason, we expect that many employers would meet the SBA 

standard for small entities. We do not believe that this proposed regulation would 

impose requirements on employers offering coverage through the SHOP that are more 

restrictive than current requirements on employers offering employer-sponsored health 

insurance. Specifically, small employers are currently required to offer the special 

enrollment period that we propose would apply to eligible employees and dependents 

with coverage through the SHOP, and the triggering event that we propose currently 

applies to eligible individuals and dependents, as well. The proposed provision would 

merely apply existing standards to the SHOP. Additionally, the transitional policy 

regarding employee choice does not impose new requirements on small employers 

because most small employers currently offer only one health insurance plan to their 

employees. 

Based on the foregoing, we are not preparing an analysis for the RFA because we 

have determined, and the Secretary certifies, that this proposed rule would not have a 

significant economic impact on a substantial number of small entities. 

VIII. Unfunded Mandates 

 

considered small entities for North American Industry Classification System (NAICS) Code 524114 (Direct 

Health and Medical Insurance Carriers). For more information, see ‘‘Table of Size Standards Matched To 

North American Industry Classification System Codes,’’ effective March 26, 2012, U.S. Small Business 
 18 

Section 202 of the Unfunded Mandates Reform Act of 1995 (UMRA) requires 

that agencies assess anticipated costs and benefits and take certain other actions before 

issuing a proposed rule (and subsequent final rule) that includes any federal mandate that 

may result in expenditures in any one year by a state, local, or tribal governments, in the 

aggregate, or by the private sector, of $100 million in 1995 dollars, updated annually for 

inflation. In 2012, that threshold is approximately $139 million. UMRA does not 

address the total cost of a rule. Rather, it focuses on certain categories of costs, mainly 

those “federal mandate” costs resulting from: (1) imposing enforceable duties on state, 

local, or tribal governments, or on the private sector; or (2) increasing the stringency of 

conditions in, or decreasing the funding of, state, local, or tribal governments under 

entitlement programs. 

This proposed rule does not place any financial mandates on state, local, or tribal 

governments. It proposes the application of a triggering event and special enrollment 

period to coverage through the SHOP, modification of the duration of certain special 

enrollment periods, and implementation of employee choice in the SHOP starting with 

plan years on or after January 1, 2015. These proposed amendments would only affect 

state governments to the extent that they operate a SHOP and, if they are affected, would 

not place any new financial mandates on them. 

IX. Federalism 

Executive Order 13132 establishes certain requirements that an agency must meet 

when it promulgates a proposed rule (and subsequent final rule) that imposes substantial 

direct costs on state and local governments, preempts state law, or otherwise has 

 

Administration, available at http://www.sba.gov.
 19 

Federalism implications. This proposed regulation does not impose any costs on state or 

local governments. 

In compliance with the requirement of Executive Order 13132 that agencies 

examine closely any policies that may have Federalism implications or limit the policy 

making discretion of the states, HHS has engaged in efforts to consult with and work 

cooperatively with affected states, including participating in conference calls with and 

attending conferences of the National Association of Insurance Commissioners (NAIC), 

and consulting with State insurance officials on an individual basis. We believe that this 

proposed rule does not impose substantial direct costs on state and local governments, 

preempt state law, or otherwise have federalism implications. We note that we have 

attempted to provide states that choose to operate a SHOP with flexibility such that states 

may, if they choose, offer employee choice beginning with plan years starting on or after 

January 1, 2014, or they may delay this implementation until plan years starting on or 

after January 1, 2015. 

Pursuant to the requirements set forth in section 8(a) of Executive Order 13132, 

and by the signatures affixed to this regulation, the Department of Health and Human 

Services certifies that CMS has complied with the requirements of Executive Order 

13132 for the attached proposed regulation in a meaningful and timely manner. 
 20 

List of Subjects 

45 CFR Part 155

Administrative practice and procedure, Advertising, Advisory Committees, Brokers, 

Conflict of interest, Consumer protection, Grant programs-health, Grants administration, 

Health care, Health insurance, Health maintenance organization (HMO), Health records, 

Hospitals, American Indian/Alaska Natives, Individuals with disabilities, Loan programshealth, Organization and functions (Government agencies), Medicaid, Public assistance 

programs, Reporting and recordkeeping requirements, State and local governments, 

Sunshine Act, Technical assistance, Women, and Youth. 

45 CFR Part 156

Administrative practice and procedure, Advertising, Advisory Committees, Brokers, 

Conflict of interest, Consumer protection, Grant programs-health, Grants administration, 

Health care, Health insurance, Health maintenance organization (HMO), Health records, 

Hospitals, Indians, Individuals with disabilities, Loan programs-health, Organization and 

functions (Government agencies), Medicaid, Public assistance programs, Reporting and 

recordkeeping requirements, Safety, State and local governments, Sunshine Act, 

Technical assistance, Women, and Youth
 21 

For the reasons set forth in the preamble, the Department of Health and Human

Services proposes to amend 45 CFR parts 155 and 156 as set forth below:

PART 155 – EXCHANGE ESTABLISHMENT STANDARDS AND OTHER

RELATED STANDARDS UNDER THE AFFORDABLE CARE ACT

1. The authority citation for part 155 continues to read as follows: 

Authority: Title I of the Affordable Care Act, sections 1301, 1302, 1303, 1304, 

1311, 1312, 1313, 1321, 1322, 1331, 1334, 1402, 1411, 1412, 1413. 

2. Section 155.705 is amended by revising paragraphs (b)(2), (b)(3), and (b)(4) to 

read as follows: 

§155.705 Functions of a SHOP. 

* * * * * 

(b) * * * 

(2) Employer choice requirements. With regard to QHPs offered through the 

SHOP for plan years beginning on or after January 1, 2015, the SHOP must allow a 

qualified employer to select a level of coverage as described in section 1302(d)(1) of the 

Affordable Care Act, in which all QHPs within that level are made available to the 

qualified employees of the employer. 

(3) SHOP options with respect to employer choice requirements. (i) For plan 

years beginning before January 1, 2015, a SHOP may allow a qualified employer to make 

one or more QHPs available to qualified employees: 

(A) By the method described in paragraph (b)(2) of this section, or 

(B) By a method other than the method described in paragraph (b)(2) of this 

section. 
 22 

(ii) For plan years beginning on or after January 1, 2015, a SHOP: 

(A) Must allow an employer to make available to qualified employees all QHPs 

at the level of coverage selected by the employer as described in paragraph (b)(2) of this 

section, and 

(B) May allow an employer to make one or more QHPs available to qualified 

employees by a method other than the method described in paragraph (b)(2) of this 

section. 

(iii) For plan years beginning before January 1, 2015, a Federally-facilitated 

SHOP will only provide a qualified employer the choice to make available to qualified 

employees a single QHP. 

(iv) For plan years beginning on or after January 1, 2015, a Federally-facilitated 

SHOP will provide a qualified employer a choice of two methods to make QHPs 

available to qualified employees: 

(A) The employer may choose a level of coverage as described in paragraph 

(b)(2) of this section, or 

(B) The employer may choose a single QHP. 

(4)(i) Premium aggregation. Consistent with the effective dates set forth in 

paragraph (b)(4)(ii)of this section, the SHOP must perform the following functions 

related to premium payment administration: 

(A) Provide each qualified employer with a bill on a monthly basis that identifies 

the employer contribution, the employee contribution, and the total amount that is due to 

the QHP issuers from the qualified employer; 
 23 

(B) Collect from each employer the total amount due and make payments to QHP 

issuers in the SHOP for all enrollees; and 

(C) Maintain books, records, documents, and other evidence of accounting 

procedures and practices of the premium aggregation program for each benefit year for at 

least 10 years. 

(ii) Effective dates. 

(A) A State-based SHOP may elect to perform these functions for plan years 

beginning before January 1, 2015, but need not do so. 

(B) A Federally-facilitated SHOP will perform these functions only in plan years 

beginning on or after January 1, 2015. 

* * * * * 

3. Section 155.725 is amended by removing paragraph (a)(3), and adding 

paragraph (j) to read as follows: 

§155.725 Enrollment periods under SHOP. 

* * * * * 

(j)(1) Special enrollment periods. The SHOP must provide special enrollment 

periods consistent with this section, during which certain qualified employees or a 

dependent of a qualified employee may enroll in QHPs and enrollees may change QHPs. 

(2) The SHOP must provide a special enrollment period for a qualified employee 

or dependent of a qualified employee who: 

(i) Experiences an event described in §155.420 (d)(1), (2), (4), (5), (7), (8), or 

(9); 

(ii) Loses eligibility for coverage under a Medicaid plan under title XIX of the 
 24 

Social Security Act or a state child health plan under title XXI of the Social Security Act; 

or 

(iii) Becomes eligible for assistance, with respect to coverage under a SHOP, 

under such Medicaid plan or a state child health plan (including any waiver or 

demonstration project conducted under or in relation to such a plan). 

(3) A qualified employee or dependent of a qualified employee who experiences a 

qualifying event described in paragraph (j)(2) of this section has: 

(i) 30 days from the date of a triggering event described in paragraph (j)(2)(i) of 

this section to select a QHP through the SHOP; and 

(ii) 60 days from the date of a triggering event described in paragraph (j)(2)(ii) of 

this section or (iii) of this section to select a QHP through the SHOP; 

(4) A dependent of a qualified employee is not eligible for a special election 

period if the employer does not extend the offer of coverage to dependents. 

(5) The effective dates of coverage are determined using the provisions of 

§155.420(b). 

(6) Loss of minimum essential coverage is determined using the provisions of 

§155.420(e). 

PART 156 – HEALTH INSURANCE ISSUER STANDARDS UNDER THE 

AFFORDABLE CARE ACT, INCLUDING STANDARDS RELATED TO 

EXCHANGES 

4. The authority citation for part 156 continues to read as follows: 

 Authority: Title I of the Affordable Care Act, sections 1301-1304, 1311-1312, 

1321, 1322, 1324, 1334, 1341-1343, and 1401-1402, Pub l. 111-148, 124 Stat. 119 (42 
 25 

U.S.C. 18042). 

5. Section 156.285 is amended by revising paragraph (b)(2) to read as follows: 

§156.285 Additional standards specific to SHOP. 

* * * * * 

(b) * * * 

(2) Provide special enrollment periods as described in § 155.725(j). 

* * * * * 
 26 

Dated: February 25, 2013

 _______________________________ 

Marilyn Tavenner, 

Acting Administrator, 

 Centers for Medicare & Medicaid Services. 

Approved: February 27, 2013

 __________________________________ 

Kathleen Sebelius, 

Secretary, 

Department of Health and Human Services. 

BILLING CODE 4120-01-P 

[FR Doc. 2013-04952 Filed 03/01/2013 at 11:15 am; Publication Date: 03/11/2013]